Totally agree with you here and I know he is just trying to be a good guy and do the decent thing, though this is when people get screwed over by those who are not quite so honorable.The scenario is completely understandable. OP doesn't even know there was an incident, and is simply being a decent human being and taking another employee at their word. Now if there's a claim, I'm sure he will report it promptly once that's made clear to him.
Insurance getting canceled is not alarmist. I know of many such cases where it has happened and I have a good friend who is a fraud investigator for one of the big insurance companies. People offering to pay for damage in an accident and no put it through the insurance can be viewed as fraud and is enough to get your policy cancelled, usually when the agreement all goes pear shaped and the insurance company gets stuck trying to work out who said what to who